Description

BSE notifies trading members about KYC validation requirements and blocking of non-compliant clients from trading effective January 24, 2026.

Summary

BSE has issued guidelines pursuant to amendments to SEBI KYC Registration Agency (KRA) Regulations, 2011. Clients whose KYC are not validated by KRAs and are “On Hold” (uploaded to KRA from December 01, 2025 to December 31, 2025) will be prohibited from trading and squaring off open positions effective January 24, 2026. Non-compliant PANs will be flagged as Not Permitted to Trade, and open positions will expire naturally on contract expiry dates. PANs that become compliant subsequently will be permitted to trade on T+1 basis.

Key Points

  • KYC validations not completed by KRAs result in “On Hold” status for both AADHAAR and Non-AADHAAR based OVD
  • Clients with KYC uploaded between December 01, 2025 and December 31, 2025 that remain non-validated are affected
  • Trading members must block debit transactions and suspend all trading account transactions for deceased investor accounts as reported by KRA on daily basis
  • Non-compliant client list provided by BSE at path: \EQ\Transaction\January-2026\12-01-2026 Non_Validated_Clients_by_KRAs_Clgno_xxxx.TXT
  • PANs becoming KRA compliant after blocking will be permitted to trade from T+1 day based on KRA information received on T Day

Regulatory Changes

This circular reinforces existing SEBI regulations:

  • SEBI Circular No. SEBI/HO/MIRSD/FATF/P/CIR/2023/0144 dated August 11, 2023 on KYC simplification and risk management framework rationalization
  • SEBI Circular SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/0000000163 dated October 03, 2023 establishing centralized mechanism for reporting investor demise through KRAs
  • Previous BSE notice no. 20251210-27 dated December 10, 2025 on same subject

Compliance Requirements

For Trading Members:

  • Monitor daily demise data shared by KRA and block debit transactions in deceased investor accounts
  • Suspend all transactions in trading accounts of deceased investors
  • Inactivate/close UCC (Unique Client Code) in all stock exchanges for deceased investors
  • Review non-compliant client list provided by BSE at specified path
  • Flag non-compliant PANs as Not Permitted to Trade from January 24, 2026
  • Enable trading for PANs on T+1 basis once KRA compliance is achieved

For Clients:

  • Ensure KYC validation is completed with KRAs to avoid trading restrictions
  • Complete pending validation requirements if KYC is “On Hold”

Important Dates

  • December 01, 2025 to December 31, 2025: Period during which KYC uploads to KRA are subject to this circular
  • January 12, 2026: Circular issue date
  • January 24, 2026: Effective date for trading restrictions on non-validated clients
  • Contract Expiry Dates: Natural expiry of open positions for non-compliant clients who cannot square off

Impact Assessment

Market Impact:

  • High impact on clients with pending KYC validations who will lose trading access
  • Potential forced holding of positions until natural expiry for non-compliant clients
  • Market participants may face liquidity constraints if unable to square off positions

Operational Impact:

  • Trading members must implement systems to identify and flag non-compliant PANs
  • Daily monitoring required for KRA compliance updates to restore trading access on T+1 basis
  • Administrative burden on members to manage client communications regarding trading restrictions

Compliance Impact:

  • Strengthens KYC compliance framework across market intermediaries
  • Enforces timely KYC validation and reduces regulatory risk
  • Aligns with SEBI’s anti-money laundering and investor protection objectives

Contact Information:

  • Phone: 022-2272 8435/5785
  • Email: ucc@bseindia.com
  • Contact persons: Keyur Punatar (Deputy Vice President, Investigation), Poonam Pisat (Assistant Vice President, Investigation)

Impact Justification

Critical compliance deadline affecting client trading rights. Non-validated KYC clients will be blocked from trading and cannot square off positions from January 24, 2026.